Blockbuster bankruptcy draws closer

Following predictions earlier this month, Blockbuster has apparently informed a number of its key partners that it will be entering into a pre-planned bankruptcy” agreement in mind-September.

LA Times reports that the retailer’s chief executive Jim Keyes flew to LA last week to meet representatives from studios such as 20th Century Fox, Paramount, Disney, Universal, Warner Bros and Sony Pictures and inform them of the company’s intentions.

Though plans are not yet set in stone, Blockbuster knows it must act quickly in the face of debts nearing $1bn. As part of its bankruptcy move the chain hopes to escape between 500-800 US store leases. However, the whole process depends on support from key partners and their willingness to continue stocking the chain throughout the turmoil.

It hopes that if it were to exit bankruptcy it can further grow through a number of non-retail initiatives such as branded DVD kiosks, as well as through developing its struggling digital business.

One stumbling block, however, is Blockbuster’s wish to continue offering movies from the same day they go on general sale. Other firms have instead agreed to a 28-day rental window.

The retailer has lost around $1.1bn since the beginning of 2008 and in the last year alone has closed nearly 1,000 US outlets.

The extension of our forbearance agreement is a strong sign of support from our senior secured noteholders as we work toward putting in place a more appropriate capital structure to support Blockbuster’s long-term growth,” a Blockbuster spokesperson stated.

Our discussions continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future.”